AMD to attempt self-resurrection — but not with ARM

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Recent subpar CPU launches and product cancellations have left AMD in an ugly position, but reports that the company is preparing to jettison its x86 business are greatly exaggerated and wildly off base.

Yesterday, Mercury News ran a report on AMD’s struggles to reinvent itself and included this quote from company spokesperson Mike Silverman: “We’re at an inflection point. We will all need to let go of the old ‘AMD versus Intel’ mind-set, because it won’t be about that anymore.”

This single quote has been spun by other publications into speculation that AMD intends to launch ARM CPUs either alongside its x86 chips or as wholesale replacements for them. When we contacted Silverman, he confirmed that the original statement has been taken somewhat out of context and provided additional clarification. “AMD is a leader in x86 microprocessor design, and we remain committed to the x86 market,” Silverman told us. “Our strategy is to accelerate our growth by taking advantage of our design capabilities to deliver a breadth of products that best align with broader industry shifts toward low power, emerging markets and the cloud.”

The larger truth behind Silverman’s statement is that no matter what AMD does, it’s not going to be “AMD versus Intel” anymore. ARM plans to push into netbooks and servers, while Intel has plans for tablets and smartphones. In the future, AMD will be crossing swords with the likes of Qualcomm, Texas Instruments, Nvidia (in CPUs), and Intel.

ARM chips may be popular, but any attempt AMD made to shift in this direction would likely be disastrous. AMD may be the CPU industry’s perennial also-ran, but it’s the only competitor that managed to survive against Intel, despite Santa Clara’s determined attempts to crush it in the courtroom and behind closed doors. It has decades of experience in x86 design and none whatsoever in the ARM industry.

Furthermore, the numbers don’t add up. In late October, Nvidia CEO Jen-Hsun Huang told the AsiaD conference that his company had invested $2 billion into Tegra in the past five years. Nvidia’s most recent quarterly filings reveal that its consumer products business (CPB) earned $481.4 million in the first nine months of 2011. Tegra 2 is doing extremely well — but it hasn’t yet made back its startup costs. AMD has neither the time nor the cash flow to commit to an equivalent long-term ramp, particularly when it has proven technology already on the table.

It’s far more likely that AMD’s new strategy is to build future low-power x86 parts that can fit into tablets and smartphones. The company already scrapped plans to release an ultra-low power version of its current Bobcat CPU, but the recent decision to move 28nm production to TSMC from GlobalFoundries means AMD had the opportunity to build a new roadmap for itself.

Just because AMD isn’t likely changing CPU architectures doesn’t mean the shift in design focus isn’t significant. Originally, the company’s focus was on scaling Bobcat’s performance and core count to the point that the chip would anchor the low-end notebook segment. That may or may not still happen, but we strongly suspect the company is now primarily planning for power-optimized Bobcat SoC’s that will primarily compete against Tegra 3 and 32nm Atom in tablets.

In order to make that happen, Sunnyvale will need to aggressively optimize its 28nm hardware for power efficiency. One method of doing this is to combine multiple chip functions in a single die — referred to as an SoC (system-on-chip). AMD has never built high-end SoC’s before, and it’ll need to nail them squarely in order to compete. This is one reason we may see the company field several 28nm chips, with the optimized hardware appearing sometime after the first iterations.

It’s a risky strategy. It’ll be at least a year before AMD has 28nm chips shipping in volume and 2-3 years for the company to reposition itself as a mobile manufacturer. The only way to fund the transformation is to keep selling hardware into traditional markets, despite the fact that those segments are no longer the company’s primary focus. It may very well be that this is AMD’s last risk — the company’s final chance to create a space in which it effectively competes with Intel.

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Right now Tegra is not in anything that is selling real well. Let’s face it, unless your product or chip is in a Apple product you can pretty much count yourself out. If I was AMD I would try really hard to get in with Apple on at least a couple products. I hear rumors of ATI graphics coming back to Mac’s. If that is true that is a good start. But I doubt if AMD has any really hope of regaining their momentum. They simply have taken too many missteps.

Joel Hruska

Jescott,

Tegra did $481.4M worth of business in the first 9 months of 2011 compared to ~$127M in the first 9 months of 2010. That’s an impressive ramp.

Tegra 2 has done extremely well in smartphones. Non-iPad tablet sales have been much lower, but that’s not something being attributed to any particular issue with NV’s part.

Joshua Powell

Apple is a tiny tiny segment of the computer market. Just because you think its cool doesn’t mean anything. Apple sells underpowered junk to users who normally couldn’t figure out how to do basic things on a pc. If your dumb enough to buy Apple then your dumb enough to believe that crap you just spewed. Also I have only bought AMD products for my personal builds as well as everyone I know. Most people who do their own builds and work in the industry prefer AMD because they are stable. I have had 2 intel’s melt through end user laptops this past month. Not once ever has an AMD overheated like this and when the fan fails the firmware is good enough to catch it before a melt occurs. AMD has the side of virtually all IT pro’s which means a lot. And to the author if AMD’s 30% marketshare is somehow bad then Apple’s 10% must mean it’s failing right?

Joel Hruska

Joshua,

AMD currently has ~18 percent of the desktop market, 5.5 percent of the server market, and 11-12% of the mobile market. This breakdown is more important because desktop sales are shrinking in general, while AMD’s share of the server market has fallen from nearly 30% in 2006 to just a bit over 5% today.

Mobile *is* where AMD is doing the best atm, but the company faces substantial challenges in building on its 2011 momentum. I’ve detailed this in other articles.

“We’re at an inflection point” – Really? I wonder what that would be? Maybe that AMD can’t make a competitive product to save their lives? But why would that suddenly be an inflection point? It’s been that way for almost 10 years now. The only different now is that AMD is now publicly admitting that they can’t compete anymore. Their technology and ability to develop new product has gotten so bad they can’t even come close. AMD’s death is at hand. They have been able to live off scraps for all these years because they are the only second source. That’s not going to be the case in next couple years.

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